The Foreclosure Prevention and Sound Servicing Act of 2008 (or H.R. 5679) was the subject of much discussion in Washington, D.C. today. Even the Mortgage Bankers Association (MBA) weighed in, expressing some of the organization's concerns about the Act in a press statement.

The Act, which would leave room for the legal community to officially block a foreclosure under the pretense that a servicer or lender did not engage in reasonable loss mitigation practices, was criticized by the MBA for creating a market situation that could cost borrowers later on.

David Kittle, chairman-elect of the MBA, said “mandating debt-to-income ratios on first loans would require holders of first liens to subordinate their economic interests to the interests of junior lien holders and unsecured creditors, which may be the source of the borrower's inability to stay current on the mortgage payments in the first place.”

Kittle said laying out specific loss mitigation criteria also could have the negative effect of hindering lenders and servicers in their quest for the right home retention solution. He added that “prescribed and detailed mitigation procedures would deprive lenders of the flexibility required to negotiate effectively with borrowers to achieve a manageable debt payment schedule.”